Thursday, April 17, 2014

Making your Pitch Right: Mistakes to avoid while pitching to an Investor

~ Written by Aniket Dey

The
advent of entrepreneurship in India coupled with a growing economy conducive to
innovation and technology has paved a path for an entrepreneurial boom in
India. One of the primary reasons a lot of people shied away from taking the
road less traveled of entrepreneurship was the lack of financial resources.
That isn’t the case anymore. There is a large network of venture capitalists,
angel investors and independent funds ready to invest into ideas that have the
ability to make money.

Lets’
see - how it all works. You set-up a
start-up, build a product and start selling to customers, only to find out you
need more money. You need more human capital, costs are soaring or you’re
simply running out of money. What next? ‘Exit’ at this point will hurt you and
your aspirations badly. So the alternative is – arrange for funds. Where do you
get the money from? Angel Investors, Venture capitalists etc. are there. But
the question is – HOW? How do you pitch to them?

I've been an advisor and investor at various early stage start-ups and I've noticed a
common denominator - entrepreneurs committing some common mistakes while
pitching to investors. For an entrepreneur, there are various factors which
point to the success of a venture- profits, growth, social media presence,
partnerships etc. However, for an investor, there is only one measure of
success- Return on Investment (ROI). Will they be able to recoup their
investment? How long will it take? Is there an opportunity to exit?

The
mistakes to avoid while pitching to an investor:-

Talking Potential

Every
business has potential, but that is not a differentiating factor. You have to
aim to be disruptive and to grow exponentially, which is what investors look
for. Sometimes passion clouds perspective. Instead of focusing on the
opportunity size, focus on developing a competitive advantage. This will give
you an edge over others with similar ideas that are lost in the sea of
potential.

Facts and numbers don’t
sell alone, stories do.

I've noticed a large
number of people who correlate statistics to success. Ever wondered why some
movies and books gross billions of dollars, simply because people connect to stories.
Keep presentations about realism. If you’re selling a health product for
children, don’t start off by talking about what percentage of children is
obese. Instead, say something like “Imagine if your loved one were to face
health issues at a young age.” Always establish a sense of familiarity and
trust.

Idolize your
Business Plan

I've seen too many plans go wasted because the entrepreneur was not willing to
change or tweak his/her idea. When I made my first pitch to an investor
competing against 50 other business ideas, he didn't like what I had to say. He
countered me with a changed business model which basically threw junk at my
plan. But in the long run, I saw that being flexible and having an open mind to
learn can make your product bring more moolah and success to you.

Lack of focus

In
Bangalore, I've noticed that far too many people are starting up. That’s a good
thing but also a bad thing. People are creating products and technology in
search of a market instead of designing something to solve the market needs.
It’s an economic fundamental – ‘demand has to meet supply’. Instead of second
guessing, you should go out there and understand your potential market. Talk to
customers, engage them and find out what needs have to be solved.

Optimism Glut

Being
optimistic is a key trait of an entrepreneur. However, over optimism can kill
your vision. Being over optimistic about
sales, adoption rates and development can leave you in shackles. This needless
optimism in financial forecasts could underestimate the case required to
achieve key performance milestones to help the business raise capital and
surpass break-even.

Lack of Humility

The
golden rule every entrepreneur must swear by is that you aren't the smartest
guy in the room. Accept advice; be
grateful for their time and gracious if they decline. Entrepreneurial circles
are small in India, if you burn one bridge now, the rest of them could fall
like dominoes sooner or later.

About Aniket Dey:

Aniket Dey is a student and an Africa / Asia focused entrepreneur. He is
a B.Com (Honours) student at Christ University, Bangalore. Aniket has been an
advisor, investor and founding team member in various early stage start-ups.
His naïve and romantic belief is to make positive social impact through
business and change the world. He has been published in The Telegraph, The
Economic Times and YourStory.com. His hobbies are sports, food and networking.